'Bottom fishers' help oil price rebound after sell-off

Oil prices rebounded on stronger economic news following a sell-off late last
week that left traders pushing the panic button and hedge funds nursing
heavy losses.

While some traders put the rebound down to what they called bottom-fishing, others said stronger export numbers from Germany and positive payroll figures in the US boosted confidence about the health of the global economic recovery.

Brent crude rebounded $4.41 to $113.54 a barrel in late-afternoon trading, as traders took the sell-off as an opportunity to buy in after a 13pc fall in prices last week.

The rebound came as figures released in the US suggested hedge funds and other traders were hit hard by last week's fall.

Data released by the Commodity Futures Trading Commission (CFTC) showed that while traders had reduced net-long positions on oil futures by 2.4pc in the week to May 3, the value of the positions was just 5.7pc off the all-time record set in March.

"It's terrifying," Hamza Khan, an analyst with the Schork Group in Pennsylvania told Bloomberg. "I would hate to be on the wrong side of that trade. The CFTC data showed people got long, and to see it crash so quickly should scare off some of the speculators that have come into crude."

While some traders put the rebound down to what they called bottom-fishing, others said stronger export numbers from Germany and positive payroll figures in the US boosted confidence about the health of the global economic recovery.

JP Morgan predicted that Brent crude would continue rising to $120. "While financial bushfires or perhaps a rapid resolution to the Libyan civil war could radically alter market dynamics, the balance of both risks and fundamentals still points to a supply constrained world," the bank's analysts said.